Former Asda boss Andy Clarke: Brexit will be ‘tough’ for grocers

Clarke, who exited the Walmart-owned chain in July but remains president of IGD until the end of the year, said there was “a lot of nervous optimism” in the industry following June’s shock vote to leave the EU.

He told the IGD Big Debate that the impact on food pricing would be “more immediate” than in non-food businesses, because grocers do not hedge their currency to the same extent as fashion and general merchandise retailers.

Clarke predicted the effect on grocery prices could emerge in “the first to second quarter” of next year, but admitted there was still a lot of uncertainty surrounding what Brexit means for the industry.

“Going into the vote, most big businesses across the UK thought the vote was going to go a particular way and talked about the risks of the ‘leave’ campaign winning the vote,” Clarke said.

“Here we are, post that vote being taken, and the reason why there is so much nervousness now is because everyone is trying to work out what ‘leave’ means and when that will take effect.

“No business wants to put the customer under pressure because it will affect their businesses, so they will make the right choices, but it’s going to be tough”

Andy Clarke, IGD president

“The short-term impact is, of course, the currency and who knows if that is a short-, medium- or long-term position.

“But the next 12 months are going to see some change and the economy is going to be the first area where we’ll see it.”

He added: “I’m sure, whether it’s Mike [Coupe] at Sainsbury’s, the team at Tesco, or other businesses, they are going to continue to be challenged by the situation that we find ourselves in.

“We are coming out of Europe, whatever form that may take, and the impact that’s going to have on the economy we are yet to see unfold.

“But one thing’s for sure, retailers will continue to do the right thing for consumers.

“No business wants to put the customer under pressure because it will affect their businesses, so they will make the right choices, but it’s going to be tough.”

Negotiations with suppliers

Amid the backdrop of Brexit uncertainty, Clarke said we shouldn’t have been “surprised” by last week’s pricing spat between Tesco and major supplier Unilever.

The supermarket giant was embroiled in a well-publicised row with the firm after it demanded a 10% increase in the shelf price of popular brands including Marmite, PG Tips, Pot Noodle and Ben & Jerry’s ice cream.

Tesco refused and a slew of products were temporarily de-listed, before a deal was eventually thrashed out.

But Clarke warned “more of those discussions” will take place as suppliers and grocers attempt to negotiate the best possible deals during uncertain times for their businesses.

“There will be more of those discussions taking place in the months ahead with all business that retailers trade with”

Andy Clarke, IGD president

“Prices go up and down all the time, that’s just the nature of retail,” Clarke added.

“Discussions take place between manufacturers and retailers all the time. What happened last week, those sort of discussions happen all the time.

“Obviously, some sanity came to the fore and the decision was taken between both businesses to move on.

“That isn’t new. There will be more of those discussions taking place in the months ahead with all business that retailers trade with. It’s nothing new and we shouldn’t be surprised to see it.”